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From the veranda where you take afternoon tea, the view unfurls around you  lush, rolling hills dotted with immaculate pastel cottages, pink sandy beaches and an iridescent, turquoise ocean  and you realize that Bermuda has a way of waking up the senses even as it quiets the mind. It is a true retreat to a sophisticated yet simple way of life, shared by a welcoming people who combine British reserve with considerable island warmth.

But this civilized sanctuary is no bargain. While its easy charms have seduced generations of devotees, Bermuda has never been on the money-conscious traveler's itinerary. This summer, though, Bermuda is celebrating its 400th anniversary  and hoteliers, airlines and vacation-package providers are offering robust discounts to court visitors. Considering that Bermuda is also easy to access (flights from New York City take just over two hours) and that its latitude  due east of North Carolina  means perfect summer weather (while the Caribbean's tropical isles heat up), for the uninitiated, there may be no better time to go. (See pictures of luxury private islands.)

What to Do. The main activity on this hook-shaped archipelago of islands is, as you might expect, taking in its natural beauty. Divers come here to explore the abundant coral reefs that surround Bermuda, along with the dozens of historic shipwrecks that are now inhabited by a wide variety of marine life. Some wreck sites are shallow enough for snorkelers to view, including the Constellation, which sank in 1943 about eight miles off the coast of Bermuda en route to Venezuela with a hull full of medicines and whiskey. The ship, which now lies 30 feet underwater, was the inspiration for Peter Benchley's book The Deep and the subsequent film.

Golfers also come routinely to Bermuda, which has more golf courses  nine  than fast-food restaurants, making the country's concentration of courses per square mile the highest in the world. Most golfers play Bermuda in the winter, when it's cooler and cheaper to visit, so the links are less crowded in summer. We recommend the government-owned Port Royal, which reopened in May after a $15 million renovation and is slated to host the 2009 PGA Grand Slam of Golf in October. The regular greens fee is $225; guests of the Pompano Beach Club next door get a 25% discount. Another good course, Riddle's Bay, has a more palatable greens fee of $115.

One of the best ways to see Bermuda is by bicycle  though mopeds are the preferred method of transportation here, we recommend renting a nonmotorized two-wheeler, which is a lot safer. Even better, this tiny country of 21 square miles  one-third the size of Cape Cod  has 22 miles of bike paths, on which mopeds are not allowed. The Bermuda Railway Trail follows an old rail bed and traverses the entire string of eight islands that make up the inhabited parts of Bermuda. Cyclists on the path are never out of sight of the islands' clear waters, craggy bluffs and white-roofed cottages. Bike rentals cost about $10 per day or $50 per week; at some hotels, they are free. Remember to ask for a "pedal bike" when renting; if you ask for a bicycle, you'll get a moped. (See TIME's Global Adviser for exotic, beautiful and interesting getaways.)

The Bermuda Railway Trail is equally enjoyable on foot. Hiking the trail usually leads to detours off it, like to Somerset, a village accessible only by the smallest working drawbridge in the world. The short bridge has an 18-inch gap covered by a plank, which is removed to allow unsailed masts to go through. Somerset is also the site of the annual summer Non Mariners' Race, in which entrants build absurdly unseaworthy craft to lose the nonrace "in the most astonishing fashion."

Where to Stay. To celebrate the country's 400th anniversary, the Bermuda Department of Tourism is offering a $400 discount on stays of at least four nights at 15 participating hotels; the offer is good through August 21 for rooms booked by August 17. The Fairmont Southampton, a sumptuous resort on Bermuda's highest hill, has eligible deals, including a seven-night package with airfare from New York City (we found it on Bestfares.com) for $1,450 per person  a significant saving from the hotel's usual rate. Similar deals are available at other high-end properties, including Elbow Beach, the Fairmont Hamilton Princess and Coco Reef Resort.

At the western end of Bermuda, about 20 miles from the airport, is 9 Beaches, where guests sleep in cabanas  actually, air-conditioned platform tents on stilts that sit on and around the beach (some cabanas hover over the water, with viewing panels in the floor). The resort has three restaurants, and its package rates are comparable to those at the fancy resorts. For some guests (beach bums, divers and romantics) 9 Beaches' isolation is a blessing, but for others it's a hassle  once you get all the way out there, it's a real effort to go anywhere else.

Cheaper deals can be had at midrange hotels, like the Grape Bay Beach Hotel, where a week's stay including airfare from New York City, costs as little as $893 per person, with breakfast. The hotel is modest, but close to Bermuda's best beaches, along the southern shores. Perhaps one of the most stunning beach walks in the world is at South Shore Park, a 1.5-mile stroll between Horseshoe Bay and Warwick Long Bay.

Another affordable way to visit Bermuda is by boat. Several cruise lines are offering big bargains this summer: Norwegian Cruise Line has a seven-day cruise from Baltimore starting at $579; it docks for three nights at the colonial village of St. George, which was the first permanent British settlement in Bermuda and is today a UNESCO World Heritage site. Similar cruises from Boston or New York City start at $749. Royal Caribbean has a five-day cruise from Baltimore, with two nights at King's Wharf, for $699 per person. (See classic pictures of the beach on LIFE.com.)

Where to Eat. Restaurants, especially at the resorts, are expensive, and most of them expect guests to dress for dinner  for men that means Bermuda shorts, knee socks and a jacket. Not your style? Adventuresome souls can check out the local scene at out-of-the-way spots like Dennis's Hideaway (Cashew City Road; 441-297-0444) on St. David's Island, east of the airport (most places you'd want to go to are west). Dennis wears a brown paper bag for a chef's hat and serves food on plastic plates, but he makes a killer fish chowder, curried mussel stew and shark hash.

In the little-touristed, uptown section of Bermuda's capital, Hamilton (the neighborhood may look a little sketchy, but Bermuda is known for its safety), try the jerk chicken, coconut fish and banana dumplings at Jamaican Grill (32 Court Street; 441-296-6577). And don't leave the isles without stopping by the 1930s-era Swizzle Inn in Warwick for its Dark 'n' Stormy, a local concoction of Bermuda rum and ginger beer.

Basics. Eight airlines serve Bermuda International Airport (BDA) in Hamilton, so it pays to compare. Round-trip summer fares from the East Coast have dropped considerably, down to about $300; bargain hunters can do even better with patience. JetBlue had a recent $198 round-trip fare from New York City.

Rental cars are verboten in Bermuda  the narrow, winding roads have been deemed too dangerous. The law also prohibits hotels from providing transportation to guests to and from the airport, and taxis are expensive (the ride from the airport to 9 Beaches is $50). So, depending on the size of your group, the shuttle buses from the airport are a better deal, at about $15 per person. But smart visitors take the government-run Bermuda Breeze buses  from the airport and around the islands. Single rides cost $3; an unlimited weekly pass is $45, including ferry rides, and can be bought at the airport, as well as at Bermuda's four visitor centers.